England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM PLYMOUTH COUNTY COURT
(MR RECORDER LICKLEY QC)
(LOWER COURT CITATION No. 7PLO4220)

		Royal Courts of Justice Strand, London, WC2A 2LL
		24th June 2009

Lord Justice Moore-Bick:

1. This is an appeal against the order of Mr Recorder Lickley Q.C. in the Plymouth County Court on the trial of issues relating to liability raised by the respondents' counterclaim. By his order the Recorder ordered that judgment be entered for the respondent on the counterclaim for damages to be assessed.
2. The appellant is the University of Plymouth, which between 1998 and 2005 made available to the respondent, European Language Center Limited ("ELC"), accommodation and teaching facilities at its campus in Exmouth for the provision of English language courses during the summer vacation. ELC was established in 2004 to provide services in England to its German parent company, International Projects GmbH ("IP"), which provides summer holiday language courses to students across Europe. The question that arises on this appeal is whether the parties entered into a binding contract for the provision by the university of accommodation and other facilities during the summer of 2006.
3. The relationship between the parties began in 1997 when IP approached the university to discuss the provision of rooms, meals, living accommodation and teaching facilities to enable it to improve its ability to offer English language courses in this country. From the outset IP was seeking to establish a long-term relationship, but the university was unwilling to commit itself for more than a year at a time. Between 2001 and 2005 the parties entered into a formal written contract each year for the provision by the university of the services required by IP. We have been provided with copies of the contracts for 2003, 2004 and 2005, and with the first page of the contract for 2001. In each case, other than the contract for 2005, the document itself contained an express recognition of the parties' intention to continue their collaboration in the years up to, and including, 2005. The contract for 2005 contained no similar expression of intent in respect of 2006 or future years.
4. Each of the contracts contained detailed conditions of contract, which included force majeure and arbitration clauses and terms of reference dealing with the details of the meals and accommodation to be provided as well as classrooms and recreational facilities. A separate section dealt with administrative matters and another with the financial arrangements.
5. The contract for the summer of 2001 was dated 19 April 2001. The Recorder found that it was signed during that month, presumably on or around that date. He found that the contract for 2002 was signed in May of that year. The copies of the contracts for 2003 and 2004 with which we have been provided are both undated and it is not clear when either was signed. The Recorder was unable to make any findings about that. The contract for 2005 takes a different form from those which preceded it. It too is undated, but was signed by both parties on 5 May 2005.
6. Although IP was keen to continue its relationship with the university, it is apparent from the agreements themselves that the university was more cautious about the development of the relationship beyond 2005. Changes in arrangements relating to graduate students and the projected redevelopment of parts of the Exmouth campus were likely to reduce the amount of accommodation that could be made available and there may also have been some second thoughts about the number of foreign students that it wished to accommodate during the summer vacation. At all events, on 24 May 2005 Ms Nicola Griffin sent an e-mail on behalf of the university to Mr Helge Maule, the managing director of ELC, alerting him to certain developments at the university that were likely to effect business for the following year, 2006. She said:

"I thought that I should make you aware of some developments at Exmouth Campus which are likely to affect your business for next year.

Recently we have had some problems with some post grad students whose course does not finish at the same time as the rest of the students. As a result of this those students affected will have an extended licence next year to cover the extra period up to July 3rd.

Given that we need turn around time after the students leave to clean the rooms, it looks at the moment that we will only be able to offer you the following during 2006 ….

I am not aware of any future development plans by Jarvis/UPP at present, so there will be no new rooms available. However there will certainly be less beds available than this year, so we are advising you that there will only be 200 beds available for you to sell. As yet I do not know of any maintenance plans at Exmouth campus. However I will keep you informed as soon as we know of any plans which may affect your summer booking with us. As ever with these things, this is not set in stone, but I am advising you that these changes are likely to take place to allow you to plan accordingly.

Please contact me if you have any queries."

7. No one on behalf of ELC replied to that message. Over the summer there were further e-mail exchanges between the parties about various matters connected with the behaviour and supervision of the students, which had led the university to make complaints, but there was no further written communication about accommodation for 2006 until 13 September, when Ms Griffin sent an e-mail to Mr Maule which concluded with the following sentence:

"I am at present involved in finding out availability of accommodation for 2006 and will let you know what we will have available to let in due course"

8. That message did not elicit any immediate response from Mr Maule or anyone else at ELC. If it was mentioned in the course of a telephone conversation, as it is suggested may have been the case, the response does not appear to have been of sufficient importance to have been recorded by either party.
9. On 29 September 2005 Ms Griffin sent another e-mail to Mr Maule in the following terms:

"Just to confirm to you our conversation today – we are only going to have beds for a maximum of 100 students during 2006. The licences issued to students this year mean that a much greater proportion will have to remain in residence for longer. Secondly, we will not have sufficient staff available to service any larger numbers."

She then gave details of the available of rooms and continued:

"I am giving you this information now so that you can plan for greatly reduced numbers. If on reflection you consider this number unviable, please let me know as soon as you can, so that we can make alternative arrangements for use of the campus if necessary."

10. That e-mail did provoke a response from Mr Maule. Almost a fortnight later, on 12 October, he replied to Ms Griffin as follows:

"The reduction to 100 students at a time, which you mentioned in your mail, is not acceptable and not in line with our contractual situation. I agreed to a reduction to 250 students last year and even that created problems in 2005 as we both know. We have designed and agreed the contract in the spirit of a long term commitment, which allows both sides to plan accordingly. The annual renewal is a formality which becomes necessary because of the annual costs negotiations but there is a clear undertaking from our side to fill as many beds as possible and provide you with much needed income and from the University's side to make all facilities on the Rolle campus available to us. We are tied into long term commitment with partner organisations and already the intended closure of 2008 forces us into heavy negotiations with some of them."

11. On 13 October Mr Andrew Littlejohn responded on behalf of the university in Ms Griffin's absence on holiday as follows:

"With regard to the capacity offered for 2006, I must stress that our offer of accommodation to your Language School remains as an absolute maximum of 100 students at any one time.

The University does not have a long term contract or an agreement with your company, but only an agreement which may be renewed on an annual basis providing the University can serve such an agreement.

If our offer of 100 places is unacceptable then you will need to seek an alternative venue for 2006 and thereafter."

12. Mr Maule responded on the next day by saying this:

"Thanks for your quick response in the absence of Nicola and I am pleased that we have managed to resolve the invoice issues so quickly and without any problems. This is the first time and good news for all parties concerned.

As far as the maximum capacity is concerned I would be grateful if we could be provided with the reasoning behind the intended limitation. As you are probably aware our maximum capacity has dwindled from over 300 students in 2004 to 250 in 2005 and from and from earmarked 200 students in May 2005 (Mail from Nicola) for 2006 to 100 students in July 2005 for 2006.

This development since the summer of 2004 is unusual and not in line with the customary practice in our successful partnership over the years. Up to now the University has been fully aware that in our business everything depends on long term planning and reliable agreements. On any changes for 2006 we would have had to have been notified at the latest in 2004 and so far we always have the planning security of 2 years at least. The intended closure in 2008 – although formally we have no notification so far – gives us three years to move our customer streams to alternative sites, for which we will need to make arrangements in summer 2006 for a pilot in 2007 before implementation in 2008, to give you just one example."

13. Mr Littlejohn replied to that message on 18 October, saying as follows:

"Rather than wait for Nicola to return from her holiday as I realise time is of the essence, I will explain the University's position on the capacity available for 2006 at Exmouth.

The decision was made on the basis of the level and quality of service we can provide. Last summer was not good for either of us. For a number of years I have been concerned with the capacity you requested was far more than we could successfully service. Even though we have asked you to agree maximum numbers, these have not been adhered to, last summer on a number of occasions your 250 limits was exceeded by 30+. My interpretation of Nicola's email in May this year specifying a maximum capacity of 200 was for the summer of 2005, not 2006 as you claim."

Finally, on 16 November 2005 Ms Griffin, now back in the saddle, asked Mr Maule by e-mail whether ELC wanted to accept the 100 places on offer from the university for 2006. That offer was not accepted.

14. In November 2007 the university began proceedings to recover from ELC the outstanding amount of fees due in respect of the facilities provided during the summer of 2005. The claim amounted to £61,252.52. ELC did not dispute the amount due, but sought to set off a counterclaim in respect of what it alleged to have been a breach of contract on the part of the university in refusing to make 200 places available in the summer of 2006. ELC's primary case is that a contract came into existence as a result of its acceptance of the university's offer contained in Ms Griffin's e-mail of 24 May 2005 to make 200 places available between 17 June and early September.
15. Mr Ball submitted on its behalf that in the light of the pervious course of dealing between the parties, and in particular of the fact that the university was aware that the nature of IP's business required it to begin marketing its courses for 2006 well before the end of 2005, that e-mail was intended to be, and was, understood by ELC to be an offer of accommodation, the acceptance of which would give rise to a binding, albeit informal, contract that would in due course be superseded by a formal contract of the kind that the parties had entered into in previous years. He submitted that although ELC had not responded to Ms Griffin's e-mail, it had accepted the university's offer orally or by conduct in the course of the numerous telephone conversations that had subsequently taken place.
16. This argument commended itself to the Recorder. He held that the written contracts that had been entered into in the years up to and including 2005 finalised details such as the precise number of beds to be provided, the price to be paid and terms of payment, but that a firm agreement in relation to occupancy had been made many months in advance. He held that the e-mail of 24 May was sufficiently clear and detailed in its terms to amount to an offer of places for Summer 2006. As to acceptance, the Recorder found that there had been numerous conversations between Ms Griffin and Mr Maule, in some of which the offer had been discussed in such a way as to make it clear that ELC would be taking the accommodation being offered. He concluded, without making any positive finding of when or how it occurred, that the offer had been accepted, either by conversation or conduct and that there was a clear understanding on the part of all concerned that a booking had been made for 200 places, subject to final agreement at a later date on the precise number of students, prices and terms of payment. So he found that there had been an offer and that the offer had been accepted. Although he made no finding about when acceptance took place, it follows from what he said later in his judgment that it must have occurred before the end of August 2005. It is not disputed that if the university had entered into a contract under which it agreed to make 200 places available, it broke that contract by making it clear that it was not prepared to make more than 100 places available.
17. Mr Troup for the university has submitted on this appeal, however, that no binding contract of the kind found by the Recorder or otherwise came into existence, because Ms Griffin's e-mail was neither intended, nor understood to be, an offer capable of acceptance so as to give rise to legal relations, because ELC did not purport to accept it as such and because, in any event, it was too uncertain in its terms to be capable of giving rise to a contract.
18. Mr Ball was quite right in submitting that Ms Griffin's e-mail, and indeed all the exchanges between the parties, must be construed against the background of the longstanding business relationship between the parties. Moreover, I think that the Recorder was entitled to find on the evidence before him that the university must have realised that IP would need to begin organising its programme of courses for 2006 before the end of 2005. However, it is also necessary to bear in mind that it was an established part of the course of dealing between the parties that they had entered into a formal contract each year which set out in some detail the terms governing their relationship. Mr Ball submitted that it had been the parties' practice in the past to enter into an informal contract during the summer or autumn of the preceding year which established the main terms by which they were to be bound but which was subject to amendment from time to time before being finally reduced to writing when the written document was executed in the following Spring. As to that, the Recorder found that:

"The written documents represented many weeks and months, no doubt, of written negotiations, but the firm agreement in relation to occupancy were particularly, no doubt, made many months in advance."

19. The basis of his finding is not explained and the use, twice, of the expression "no doubt" suggests that he had no firm evidence that informal contracts of the kind being alleged in this case had been made in previous years. Mr Ball submitted that there was evidence from the managing director of IP, Mr Giese, that that is what had occurred, but the exchanges between the parties were not before the court and the understanding of those involved of the effect in law of their informal communications does not provide a strong basis for reaching a conclusion of that kind. The fact is that by 2005 the parties appear to have developed a significant degree of mutual trust and there had been a common intention that their collaboration would continue at least into 2005 and possibly beyond.
20. In those circumstances I do not think that one can assume that IP would refrain altogether from putting together the programme for 2006 until it had some legally binding commitment from the university. It must also be borne in mind that the e-mail said to contain the offer in this case was not sent in the summer or autumn of 2005 but in May. Moreover, the e-mail correspondence during the preceding months not only provides the immediate context in which it must be read and understood but also sheds some light on the party's practices.
21. The exchanges began on 24 February 2005 when Ms Griffin sent a message to Mr Maule asking for his agreement to her proposed prices for that summer. The final paragraph of the message contains these words:

"Please let me know if you agree, I can then produce the contract and we are in business."

22. Mr Maule replied on 2 March, agreeing the prices and stating that he would be able to provide a rough outline of expected numbers within a month. He concluded by saying:

"It would be nice if you could send me the draft contract proposed by mail, so that we can agree the details before drafting the final version.

I will be in Exmouth over Easter, so that we can theoretically meet to discuss the contract elements further if necessary."

23. At that stage, therefore, it appears that both parties contemplated reaching agreement on detailed terms before being bound.
24. On 16 March Ms Griffin sent Mr Maule another message offering to meet him when he came to Exmouth to discuss other matters and to bring the contract with her, having sent it in advance by e-mail. On 8 April Mr Maule sent a message to Ms Griffin thanking her for the opportunity to discuss the new contract while he was in Exmouth. He made some comments about the terms dealing with the costs of accommodation and the use of computer rooms. Ms Griffin replied the same day asking Mr Maule for his current numbers for that summer.
25. Further e-mail discussion on numbers and prices followed, the last exchange before the critical e-mail taking place on 12 May. In none of those messages is there any indication that any informal contract had come into existence on an earlier date; rather, the impression one gets is that the parties were even at the late stage still negotiating with a view to reaching a final agreement on terms.
26. Viewed in that context, and in the context of the wider course of dealing between the parties, the e-mail of 24 May 2005 does not look like a binding offer on the part of the university to make facilities available in 2006. It begins by drawing Mr Maule's attention to developments that were likely to affect IP's business for the following year. The expected availability of accommodation to which it referred was provisional:

"It looks at the moment that we will be only able to offer you the following during 2006"

and reference was made to the possibility of maintenance plans which might interfere with IP's summer booking. Ms Griffin described the position as "not set in stone". Importantly, in my view, the message said nothing about the teaching or leisure facilities to be made available, the terms on which services were to be provided, the price that was to be paid for them or the terms of payment. All those were essential elements of any contract and matters that in previous years had been covered by the formal written agreement. There is no reference in the message to the wider terms of any proposed contract, for example that the terms of the 2005 contract, which had by then been signed, were to apply.

27. Finally, the message ended with a request that Mr Maule contact her if he had any queries, not with a request for agreement or even a firm confirmation of the booking. The fact that Mr Maule failed to respond to the message of itself tends to suggest that he did not regard it as an offer to enter into a binding contract for accommodation in the summer of 2006; but whether he did or not, I do not think that the message is reasonably capable of being read in the way that ELC suggests. Moreover, I can see no basis upon which the Recorder could properly find that Mr Maule, or for that matter anyone else on behalf of ELC, purported to accept any such offer. No doubt there were, as he found, many communications between the parties during the ensuing months and no doubt they both proceeded, as he found, upon the assumption that IP would take 200 beds in 2006, but that is not enough to support a finding that ELC accepted an offer of accommodation. Acceptance of an offer must be communicated to the offeror in terms which, viewed objectively, are sufficiently clear to bring that fact home to him and leave him in no doubt that a contract has come into existence.
28. According to the Recorder, Mr Maule agreed that there had been no express acceptance by e-mail or letter, merely general discussions in the course of which he had made it clear that he wanted as many beds as possible. In my view, that is not sufficient to create legal relations. Parties to a business venture often discuss proposals at length before finally committing themselves to a contract and the fact that both sides assume that their discussions will eventually lead to a contract is not substitute for an unequivocal acceptance of terms on offer. Although an offer may be accepted by conduct, conduct that does not come to the attention of the offeror or which is equivocal will not do. Only conduct which is unequivocal in the sense that it is consistent only with the acceptance of the offer, and which is brought to the attention of the offeror, is capable of having that effect.
29. In the present case there is nothing in the exchanges between the parties or the conduct of ELC that amounted to an acceptance of an offer of accommodation set out in Ms Griffin's e-mail. The fact that IP began organising its programme for 2006 in the summer and autumn of 2005, even if known to the university, was not sufficient for that purpose because, to judge by previous years, it was something that it could be expected to do, whether or not a binding contract had already been concluded.
30. In the alternative Mr Ball submitted that even if the e-mail of 24 May was not capable of constituting an offer, the Recorder's decision should be upheld on the basis that by July or August 2005 the parties had reached agreement on the terms on which the university would make accommodation and facilities available to the ELC and had thus entered into a binding contract. In my view, however, there are a number of problems with that submission. In the first place, Mr Ball found it difficult to identify exactly when and how that contract was made, otherwise than by informal acceptance in the course of telephone conversations of an offer contained in the e-mail of 24 May. To that extent, however, the argument depends on the e-mail constituting an offer and does not add anything to the case. For the reasons that I have given, I am unable to accept that the e-mail contained in the offer capable of giving rise to a contract between the parties.
31. His other way of putting the argument was that in or about July 2005 there had been oral communications between the parties in the course of which Ms Griffin had made an offer of accommodation incorporating the terms of her earlier e-mail, which offer Mr Maule had accepted. That submission, although reliant to some extent on what had been said in the earlier e-mail, does not treat it as containing the relevant offer but simply as evidence of the terms of an offer made orally some months later. This contention did not form part of ELC's pleaded case and was not addressed in terms by the Recorder, who simply held that there had been an offer by e-mail on 24 May that was later accepted orally or by conduct. He did not consider whether a contract had been made as a result of the separate exchanges between the parties later in the year, nor did he make findings of fact sufficient to support any such conclusion.
32. In support of his submissions Mr Ball sought to rely on the university's knowledge that IP wanted to use its facilities again in 2006, upon Ms Griffin's use of the word "booking" and upon the evidence of Mr Maule that there were lengthy conversations in July 2005 in the course of which "by implication" he accepted the offer of 200 places. However, those matters are equally consistent with two parties discussing business with a view to entering into a contract at a later date.
33. It is not without significance, in my view, that Mr Ball found it extremely difficult to identify the terms on which he said the parties had agreed, but if there was to be a contract between them it was necessary for it to contain all the terms needed to enable it to work. The previous history of the matters suggests that in fact the parties considered it necessary to make detailed provision for a variety of matters which were covered by the written agreements which they executed each year. That in itself casts doubt on whether they are likely to have entered into a binding agreement without any corresponding provisions and without, as far as one can see, even having discussed the fees to be paid. Whatever may have been the case in previous years, in the absence of any clear evidence that the parties had agreed on terms with the intention of creating legal relations the evidence is not sufficient, in my view, to establish that a contract came into existence between them at that time.
34. For all these reasons I am unable to accept the alternative case put forward by Mr Ball. Accordingly, I am satisfied that no contract came into existence between the university and ELC and that the appeal must therefore be allowed. That makes it unnecessary for me to decide whether, if ELC had purported to accept an offer on the terms of the e-mail of 24 May 2005, a legally binding contract would have come into being. Mr Troup submitted that it would not, because many essential terms remained for agreement with the result that the contract would fail for uncertainty. This argument does not appear in the amended defence to counterclaim, although it did find a place in the university's skeleton argument for the hearing below, and the Recorder did not address it. In those circumstances I think it better to say nothing more about it.

Sir Andrew Morritt, CVO:

I agree.

Lord Justice Etherton:

35. I also agree.

Order: Appeal allowed